Commentary on commercial issues relating to climate change

WTO 2010 Focus on Natural Resources in World Trade Report

The World Trade Organisation publishes an annual ‘World Trade Report’ which addresses issues and trends in trade, trade policy and multilateral trading. The 2010 edition, to be published in July, will be ‘Tradein Natural Resources: Challenges in Global Governance“.

The WTO has a discussion board for which short articles are sought from the community, which should address trade vis-a-vis natural resources such as fish, forestry, and fuels, and on the ‘role the WTO could play in encouraging a more efficient management of these resources’. Accepted articles will be published, and taken into consideration by the World Trade Report authors.

While only a few articles have been published to date on the site, there are already some useful and interesting contributions to the discussion from academia spanning freshwater, minerals, fisheries and forestry.

The paper examines the literature for a number of deforestation-related drivers, including forest access and transportation costs, timber prices, agricultural prices, and conservation programs.

From their analysis, the authors conclude that it is possible that trade can both increase deforestation and reduce welfare in resource-abundant countries. Conservation programs, institution strengthening, and long-term sustainability policies (including participation in internationally aligned certification and labelling programs) can reduce such negative effects.

An interesting point is the questioning of the utility of environment-based trade sanctions: should such sanctions (and the authors specify in the appendices the Free Trade Agreements with environmental components) lead to a reduction in the value of the resource, then incentives for conservation may be reduced.

One aspect of interest from a climate change perspective is the support given to the concept of leakage: that forest conservation efforts in one or more jurisdictions or locations can lead to compensating higher rates of deforestation elsewhere – thus not necessarily a net improvement in emissions rates. This phenomenon has been a core part of the REDD debate and, in climate change ‘speak’ is known as ‘leakage’.

The authors quote a 1990 estimate that between 11%-39% of all anthropogenic emissions may emanate from the forestry sector. As such, it is critical that the international community reaches a uniform, multilateral approach to reducing deforestation, and improved forest conservation, for the purposes of stabilising greenhouse gas emissions. Otherwise, ad-hoc bilateral or unilateral investments may be costly, and undertaken in vain.

There are already substantial investments being made by both Governments and private sector in avoided deforestation initiatives. These investments now clearly need to be made within the auspices of a global agreement.